CSET Financial Management & Budgeting 3 — Questions and Answers
Question 1: Under GASB standards, what basis of accounting do governmental funds use?
- Full accrual basis
- Modified accrual basis (Correct answer)
- Cash basis
- Tax basis
Correct answer: Modified accrual basis
Governmental funds use the modified accrual basis, recognizing revenues when measurable and available, and expenditures when the liability is incurred.
Question 2: Which of the following best describes 'categorical funding' in K-12 education finance?
- Unrestricted state aid distributed per pupil
- Funding designated for a specific program or population (Correct answer)
- Local property tax revenue used for general operations
- Federal impact aid for federally connected students
Correct answer: Funding designated for a specific program or population
Categorical funding is restricted to specific programs or student populations, such as special education or English learner services.
Question 3: A district is considering issuing general obligation bonds to fund a new school building. Who must typically authorize this borrowing?
- The superintendent alone
- The state department of education
- Voters in the district (Correct answer)
- The county assessor
Correct answer: Voters in the district
General obligation bonds backed by property taxes typically require voter approval in a bond election.
Question 4: What is the primary purpose of an internal audit function in a school district?
- Preparing the annual financial report for public release
- Independently evaluating internal controls and compliance (Correct answer)
- Certifying the accuracy of state-submitted financial reports
- Approving major expenditures above a set threshold
Correct answer: Independently evaluating internal controls and compliance
Internal auditing independently evaluates the adequacy and effectiveness of a district's internal controls, risk management, and governance processes.
Question 5: Which expenditure classification identifies costs by the nature of goods or services purchased, such as salaries, benefits, or supplies?
- Function classification
- Program classification
- Object classification (Correct answer)
- Location classification
Correct answer: Object classification
Object classification categorizes expenditures by the type of item or service purchased, such as personnel services, supplies, or capital outlay.
Question 6: A school district's fund balance is classified as 'restricted.' What does this indicate?
- The board has committed funds for a future purpose
- External constraints limit how the funds can be used (Correct answer)
- Management has designated funds for a specific use
- The funds are available for any general purpose
Correct answer: External constraints limit how the funds can be used
Restricted fund balance results from externally imposed constraints—such as constitutional provisions, enabling legislation, or bond covenants—that limit resource use.
Question 7: Which of the following is an example of a capital expenditure in a school district budget?
- Purchasing classroom textbooks for $50,000
- Paying monthly utility bills for district facilities
- Constructing a new gymnasium valued at $2 million (Correct answer)
- Funding a two-day professional development workshop
Correct answer: Constructing a new gymnasium valued at $2 million
Capital expenditures involve acquiring or constructing long-lived assets such as buildings, with the gymnasium representing a major capital project.
CSET Financial Management & Budgeting 3
Under GASB standards, what basis of accounting do governmental funds use?